By Stella Fayman, Guest Blogger, paypal_logo

PayPal is an extraordinarily powerful tool which lets merchants accept payments with ease.  PayPal manages over 184 million accounts worldwide, making it the dominant force in payments acceptance.

PayPal Pros

1)    Pricing. PayPal uses straightforward flat-rate pricing which makes it better than many merchants which use tiered, but not better than merchant accounts that also have flat rate pricing or interchange plus pricing.

2)    Cost. For many businesses starting out, PayPal may be the cost effective payment processing option. However, once volume gets higher, it becomes more cost effective to switch to a traditional merchant account provider. Use the PayPal Upgrade Calculator to quickly see whether it’s time to consider a merchant account. Then learn more about switching to merchant accounts.

3)    Recognition. PayPal is universally recognized and can therefore reduce customers’ fears of fraud.


PayPal Cons

1)    Poor Customer Service. PayPal has been known to be unresponsive and downright evasive when it comes to customer service.

2)    Customization. PayPal has standard options that don’t have many of the features of a traditional gateway. For example, gateways  have APIs with more specialized capabilities like tokenization and/or the ability to qualify for industry specific interchange categories.

3)    Rules. When you play with PayPal, you play by their rules.  They can freeze your account, withhold funds, or take money out of your account for no reason. Also, funds are deposited into your PayPal account instead of a personal bank account which you control.

In conclusion, sometimes PayPal may not be the best choice to meet your payment processing needs. Doing a careful analysis and researching alternatives may save you money in the long run. If you have any questions, please don’t hesitate to reach out to me at [email protected]

Stella Fayman is project manager for a comparison shopping site for credit card processors. Follow her at @StartupStella.

The views and opinions expressed in this article are those of the guest blogger and do not necessarily reflect those of